Power delivery systems in the United States and other areas of the world are aging. Projected demands for power may outstrip the capacity of existing transmission and distribution assets unless significant capital is devoted to improvement, modernization, and expansion of such assets. Utility companies that own transmission and distribution assets, however, have been unable to entice investors to contribute capital to such an endeavor. One reason for this is that transmission and distribution assets have typically been subject to regulated returns that are lower than the unregulated returns from power generation and/or other energy-related enterprises. Accordingly, traditional systems have not valued transmission and distribution assets independently; instead, traditional systems have valued such assets based on their impact on power generation and/or other enterprises.
Another reason for the lack of capital investment in transmission and distributions assets is that utility companies have been economically deterred from divesting themselves of these assets. Despite regulatory policies that encourage such divestiture, many existing transmission and distribution assets are heavily depreciated. Due to the unfavorable tax consequences of divesting assets that are heavily depreciated, utility companies have generally avoided divesting themselves of their transmission and distribution assets.